ARMs start with lower rate than fixed-rate mortgages, offering savings upfront.
01
Adjustment Periods
Interest rates are fixed for an initial period, then adjust periodically based on market conditions.
02
Interest Rate Caps
ARMs include rate caps, limiting how much the rate can increase at each adjustment and over the life of the loan.
03
Index and Margin
Rates adjust based on a market index plus a margin, offering transparency in how adjustments are calculated.
04
Adjustable Rate Mortgage Benefits
01.
Upfront Savings
ARMs typically start with lower interest rate than fixed-rate mortgages, leading to lower monthly payments in the early years of the loan.
02.
Rate Flexibility
The interest rate on an ARM adjusts periodically, which can benefit borrowers if rates decrease over time.
03.
Potential to Save on Interest
For those planning to move or refinance within a few years, the lower initial rate of an ARM can result in significant interest savings than a fixed-rate.
04.
Variety of Adjustment Terms
ARMs come with different adjustment terms, allowing borrowers to choose how frequently their rate will adjust, providing flexibility based on their financial.
Loan Program Frequently Asked Questions
What is an adjustable rate mortgage (ARM)?
An ARM starts with a lower fixed interest rate for an initial period, then adjusts periodically based on market conditions. This can give you lower initial payments but may increase later. ARMs work well if you plan to move or refinance before the adjustment period.
Who is eligible for an adjustable rate mortgage?
Eligibility depends on your credit, income, and debt-to-income ratio. Lenders may also review your financial stability more closely since payments can rise in the future. Borrowers who qualify often have steady income and good credit history.
Will I need an appraisal for an ARM?
Yes, an appraisal is almost always required to confirm the value of the home. The appraisal ensures the lender is not lending more than the property is worth. This step is the same as with most other loan types.
What documents are needed for an ARM?
The documentation is the same as other loan types: proof of income, bank statements, tax returns, and ID. If you are self-employed, you may need extra paperwork to show consistent income.
How does the ARM process work?
After pre-approval, you apply for the loan once you select a home. The lender reviews your documents, orders an appraisal, and prepares closing. You’ll also learn when and how your rate can adjust in the future.
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